AMBASSADOR'S MEETING WITH PM-DESIGNATE SANADER:

1. (C) We have "extremely high expectations." That was how
Ivo Sanader described on December 19 what he hopes will be
very good bilateral relations with the U.S. when he becomes
Croatia's Prime Minister next week. Meeting at the
Ambassador's request in the HDZ party headquarters, Sanader
stressed that his early priorities would be moving full
throttle toward EU and NATO membership. He said he
understands U.S. priorities in Croatia and wants to become
our "strategic partner" in the region. When the Ambassador
flagged several issues of concern to the U.S., Sanader took
them on board. He promised to work to ratify the MOU on
intellectual property in January. On refugee returns, he
said he wants to move faster than the previous government and
has already made progress with Croatia's leading Serbian
political party. On ICTY, he said he was determined to get
relations off to a good start (septel to follow). On an
Article 98 agreement, Sanader promised to move as fast as he
could, but obvious near-term constraints loomed. End
summary.

NATO a Bigger Priority


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2. (C) Prime Minister-designate Ivo Sanader, joined by
incoming Foreign Minister Miomir Zuzul, met the Ambassador on
December 19 at HDZ headquarters. He said he intends to be
"very ambitious" in his first months in office. Priority
would remain getting Croatia into NATO and the EU. NATO
membership was a strategic priority -- Sanader hopes it can
be accomplished by 2006 -- but he sees it as part of a
process that can only speed up Croatia's EU membership. The
Prime Minister-designate pointed to the 10 new countries
entering the EU next spring as an example of this symbiotic
relationship. He said he looks forward to discussing
Croatia's NATO aspirations at the Istanbul Summit in May.
The Ambassador stressed that the U.S. remains committed to
seeing Croatia join NATO, hoped that the government can
continue the requisite defense reforms, but cautioned that
NATO's timetable is also governed by other outside factors.

EU Aspirations on Track


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3. (C) Sanader was satisfied that Croatia's EU aspirations
remain well on track. He had a good conversation with Romano
Prodi on December 18. Prodi had not been "precise" in his
assurances, but Sanader said he was confident that Croatia
would receive a positive avis sometime in the spring, and he
hopes it would be approved by the Council of Ministers
sometime around June. In the meantime, German Chancellor
Shroeder invited Sanader for an official visit to Berlin on
January 8. Sanader said he will be in Brussels for meetings
with Prodi at the European Commission and the new NATO
Secretary General on January 12-13, and travel to Strasbourg

SIPDIS
after that. In a visit that was postponed from this week, he
plans to be in Rome for meetings with Prime Minister
Berlusconi and the Pope on January 20. The new Prime
Minister's schedule is filling up.

Article 98


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4. (C) Related to Croatia's EU focus, Sanader told the
Ambassador that he wanted to work with us on an Article 98,
but that he would have to be very cautious. He said in
talking to Prodi and others about Croatia's EU aspirations,
Article 98 was always there -- or, as he put it, always
"somewhere present in the air." The Ambassador underscored
that signing an Article 98 with Croatia remains a priority in
Washington and that we want to move forward on it. Sanader
said he would work with us, but timing would be important.
He noted it would be enormously difficult to get the
two-thirds support such an agreement would require in the
Croatian Parliament, probably not before the European Council
of Ministers approved Croatia's avis next summer.

IPR MOU


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5. (C) When the Ambassador discussed the long-stalled
Memorandum of Understanding on Intellectual Property Rights
between Croatia and the U.S., Sanader promised to move it to
the Croatian Parliament for ratification. Both Sanader and
Zuzul were familiar with the issue -- Zuzul had been the
Croatian Ambassador in Washington when the MOU was first


signed in 1998 -- and looked eager not to let it become a
thorn in our bilateral relations. Zuzul told the Ambassador
the problem had always been Croatian Pharmaceutical company
Pliva's opposition. The Ambassador noted that he had
discussed the issue with Pliva's CEO and been assured that
the company would not oppose ratification. By way of
concluding discussion on the MOU, Sanader turned to Zuzul and
said, "Let's do it immediately." Zuzul nodded, and they
indicated it should be ratified by January.

Refugees, Serbian Community


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6. (C) Sanader wanted to raise with the Ambassador progress
he had made with Croatia's leading ethnic Serbian Party
(SDSS). SDSS would not join the government but it agreed to
support the HDZ-led coalition in the Parliament. To secure
the agreement, Sanader said, he promised to work much more
effectively and proactively to secure refugee return and on
"all other open issues" -- including even tenancy rights, an
issue which the previous government had dragged out endlessly
over its mandate. We "don't want delays like under Racan,"
he said. The Prime Minister-designate boasted that the new
coalition now enjoys the support of "all" the minority
communities in Croatia.

Croatian Troops to Iraq


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7. (C) Two other issues the Ambassador raised with Sanader
included sending Croatian troops to Iraq and concern that a
Croatian ship-yard is contemplating refitting a Libyan naval
vessel. After repeated delays, Croatian authorities had
already indicated tentatively that it would act positively on
dispatching troops to Iraq, but time ran out in the previous
government's mandate. The Ambassador handed Sanader a
non-paper describing to him the modalities for the new
government to move forward should it seek to commit troops.
Sanader took it on board, professed not to know much about
the subject, but reminded the Ambassador that he had been
supportive of the U.S. Iraq policy since before the war
started. Dispatching troops to Iraq -- the MOD has in mind a
Special Forces unit -- would, like an Article 98, require a
two-thirds vote in the Parliament.

Libya Vessel


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8. (C) The Ambassador also took the opportunity to brief
the incoming Prime Minister on the firm U.S. position
concerning Libya. There have been reports, he said, that a
contract had been signed to refit a Libyan naval vessel
called the "Al-Munyed" at a Rijeka shipyard. The Ambassador
stressed that military cooperation with Libya had no
productive future and could be illegal under U.S. law.
Sanader said he knew nothing about any possible deal, but
promised to look into the matter. The Ambassador urged the
Prime Minister-designate to take up the matter with President
Mesic, who has been informed of the U.S. position.

Comment


--------------------------





9. (C) It is prudent to stay in wait-and-see mode, but so
far the Prime Minister-designate has made no wrong moves or
statements. The bad news is clearly that he recognizes the
difficulty of delivering an Article 98 agreement in the
immediate future, but he wants to keep working at it. We
will see where this leads. He knows it is important to us
and that we hold some cards -- in particular, the U.S. has
been Croatia's biggest NATO backer. Notwithstanding this
obstacle, Sanader and Zuzul are keen to get the relationship
off to the right start. They want to visit Washington early
in the new government's mandate and hold some high level
meetings. If they stay on the reform course they have
plotted, and are able to deliver on some of their promises --
such as a ratified MOU -- we should be receptive to granting
the new Prime Minister a good visit sometime early in the new
year. We believe it important to reach out to them now,
especially with the EU moving so quickly to gain their
support of positions which -- on some issues -- are contrary
to our own.

FRANK


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